On the dynamic effects of oil price shocks: a study using industry level data

This paper analyzes the effects of oil price shocks on demand and supply in various industries. The impulse responses of identified VAR models indicate that for industries that have a large cost share of oil, such as petroleum refinery and industrial chemicals, oil price shocks mainly reduce supply. In contrast, for many other industries, with the automobile industry being a particularly important example, oil price shocks mainly reduce demand. The paper suggests that oil price shocks influence economic activities beyond that explained by direct input cost effects, possibly by delaying purchasing decisions of durable goods. (C) 2002 Elsevier Science B.V. All rights reserved.